Obama's health care challenge

Updated 3:11 pm, Monday, May 2, 2011

President Barack Obama is trying to shift the terms of the debate on Medicare and Medicaid spending - arguing that there's more waste to be cut before the patients need to feel any pain.

The problem is, the health care law is already trying most of the changes that could get rid of wasted medical spending painlessly - and the experiments aren't even under way yet.

Obama's allies have been hinting that his deficit speech Wednesday will call for doing more to cut overspending on health care. That would shift the terms of the debate to ground that's friendlier to Democrats. Rather than arguing about how much to cut spending - a debate that favors Republicans - Obama has a better chance if he talks about ways to bring down Medicare and Medicaid spending without cutting benefits.

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That way, he can draw a contrast with the Paul Ryan budget the House will take up Thursday, and argue that the programs can be brought under control "without putting all the burden on seniors," as White House senior adviser David Plouffe put it on Sunday. But he'd have to make the case that the payment and delivery reforms in the Affordable Care Act should be allowed to work - because those experiments already cover much of the known ground on how to make health care more efficient.

There is more to be done on Medicaid, though, such as making it easier for states to put low-income seniors in managed care if they're eligible for both Medicare and Medicaid, Ginsburg said. That idea is a feature of the bipartisan deficit reduction plan by former Sen. Pete Domenici and former Office of Management and Budget director Alice Rivlin, a project on which Ginsburg served as a consultant.

Obama has already said that controlling Medicare and Medicaid costs will be the key to containing the deficit, since the costs of the programs create so much of the federal government's red ink. But health care experts are divided on whether the programs can be brought under control without the kinds of structural changes Ryan has proposed: turning Medicare into a "premium support" program, which would provide limited subsidies for private health insurance, and turning Medicaid into block grants.

Ryan and other Republicans argue that it isn't possible - that the Medicare and Medicaid programs will have to provide narrower benefits to keep from bankrupting the country.

"These are the real cost drivers, and that's the reason we decided to focus on these" in the House budget resolution, Majority Leader Eric Cantor told reporters Tuesday. "You have to expect that these programs, if they're going to be around, are not going to look the same."

But Democrats are already paving the way for Obama to argue that the health care law's experiments are a good starting place and deserve a chance - and shouldn't be repealed. "When it comes to reining in the runaway costs of Medicare, the truth is the president did it first and he did it better," Sen. Chuck Schumer (D-N.Y.) said in a floor speech Tuesday.

Most estimates suggest that as much as one-third of all health care spending goes to medical care that doesn't make patients better - unnecessary services, uncoordinated care, medical errors and other problems. That's a big enough target to provide plenty of opportunities to cut costs through the health care law's experiments, such as accountable care organizations, according to David Cutler, a health care economist at Harvard University who advised Obama's presidential campaign.

"The ACA-like reforms have the ability to get rid of that. The Ryan approach probably does not. It's the difference between cost reducing and cost shifting," Cutler said.

David Kendall, a health care analyst at Third Way, a centrist Democratic think tank, estimated that even if payment and delivery reforms only cut half of all unnecessary health care spending, it would be about enough to bring Medicare spending growth down to the gross domestic product plus 1 percent - the target set by the bipartisan deficit reduction commission headed by Alan Simpson and Erskine Bowles. Obama is expected to cite their work in Wednesday's speech.

The Simpson-Bowles commission recommended expanding the experiments, such as the accountable care organizations, as quickly as possible if there are even vague signs that they're saving money. But some prominent Democrats are already worried that Obama won't just stick to the painless experiments and could endorse benefit cuts, especially to Medicaid, whose beneficiaries are less politically powerful than seniors on Medicare.

In a statement Tuesday, Sen. Jay Rockefeller (D-W.Va.) warned Obama not to cap Medicaid funding or cut the program's funding. "I stand ready to work with the president and congressional leaders on policies that would improve quality and reduce costs within Medicaid, but only in a way that also guarantees the provision of quality, effective and efficient care," Rockefeller said.

But Bob Moffit, a senior fellow at the conservative Heritage Foundation, said there will be a different kind of cost shift if the Obama administration keeps focusing on provider payment cuts and other ways to trim spending on services. More doctors will refuse to see Medicare and Medicaid patients, and more people will have to go to already overcrowded emergency rooms to get care, he said.

"You'll just not have the same level of access you have today. It's just not possible," Moffit said.

To really control costs, Moffit said, the structure of Medicare will have to change to stop shielding seniors from so much of the cost of their care, and to give them incentive to pick the most cost-efficient care possible. "Without changing the structure, you're not changing the incentives," he said.

Joshua Gordon, policy director at the Concord Coalition, said there's actually room for both approaches - a hard limit on health care spending in the programs and experiments in making health care more efficient.

The Simpson-Bowles plan, he noted, recommends limiting the growth of all health care spending to the gross domestic product plus 1 percent and then debating structural changes to Medicare and Medicaid if the costs don't come down on their own. To help providers bring those costs down, Gordon said, the experiments with new models of delivering medical care have to continue.

"Shifting to some kind of premium support model might make sense," Gordon said, "but only if you have the kinds of demonstration projects and payment advisory boards that would help the providers become more efficient."

This article first appeared on POLITICO Pro at 5:43 a.m. on April 13, 2011.